3.9 percent fiscal deficit ‘seems achievable’: Economic Survey

New Delhi, Feb 26 (IANS) The government’s fiscal deficit target of 3.9 percent for the current fiscal “seems achievable”, the 2015-16 Economic Survey said on Friday.

“Significant increase in revenue receipts, led by buoyant indirect tax collection, higher level of capital expenditure on the plan side, lower subsidies and enhanced untied resources transferred to the states following the acceptance of recommendations of the 14th Finance Commission” were the basis of the government’s optimism on this count.

The government has targeted reducing the fiscal deficit to 3.9 percent of the gross domestic product (GDP) in the current financial year, compared with four percent last year, and reduce it further to 3.5 percent in 2016-17.

“The coming year is expected to be a challenging one from the fiscal point of view because of challenges posed by a lower-than-projected nominal GDP growth,” said the survey, which was presented in parliament on Friday.

“The chances of India’s growth rate in 2016-17 increasing significantly beyond 2015-16 levels are not very high, due to likelihood of persistence of global slowdown,” it said.

“The implementation of the Pay Commission recommendations and the ‘One Rank One Pay’ scheme will put additional burden on expenditure,” it added.

Moody’s Investors Service on Tuesday said the country’s fiscal position will remain weaker than other emerging economies in the near term even if fiscal consolidation continued on course.

“Even if the budgetary consolidation continues, India’s fiscal metrics will remain weaker than rating peers in the near term, because of the relatively high levels of deficits and debts of India’s state and central governments,” Moody’s said in a report.

“The importance of the upcoming budget lies in its message on the government’s fiscal consolidation plans,” the American agency said.

“But at around 63.8 percent of GDP, India’s government debt ratio remains high compared with a median of 49.5 percent for Baa3-rated peers. Without continued fiscal consolidation, India’s government finances will continue to compare poorly with the peers,” it added.

The fiscal deficit for 2014-15 touched 4.1 percent of the gross domestic product.